Q:

H.

BPs fourth-quarter 2010 earnings report also indicates the following disclosures about the basis under which the company prepares its financial statements.

The results for the interim periods and for the year ended 31 December 2010 are unaudited and in the opinion of management include all adjustments necessary for a pair presentation of the results for the periods presented. All such adjustments are of a normal recurring nature. The directors draw attention to NOTE 2 on pages 24-29 which describes the uncertainties surrounding the amounts and timings of liabilities arising from the Gulf Of Mexico oil spill. It is likely that the independent auditors report in the BP Annual Report and Form 20-F will contain an emphasis of matter paragraph in relation to this matter.

The directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the annual financial statements. This report should be read in conjunction with the consolidated financial statements and related notes for the year ended 31 December 2009 included in the BP Annual Reports and Accounts 2009 and in BP Annual Report on Form 20-F 2009.

1. An emphasis of matter paragraph permits BPs independent auditors to formally draw attention to the financial statement note outlining the Gulf of Mexico oil spill. Why might the auditors choose this course of action?

2. BP indicates that it continued to adopt the going concern basis of accounting to prepare its financial statements during 2010. Explain what is meant by a going concern and how this assumption affects a companys financial statement. Review the third-quarter 2010 results including the income statement, balance sheet, statement of cash flows, and notes. In your opinion, does the going concern assumption seem possible?